MTS has 83 million shares outstanding with a current share price of $19.25.The firm has a market-to-book ratio of 4.17 and a book debt-equity ratio of 1.59.If MTS currently has $24 million in cash,what is its enterprise value?
A)$0.968 billion
B)$4.115 billion
C)$1.598 billion
D)$2.183 billion
E)$1.013 billion

Question

Quizplus · Accepted Answer

Enterprise Value (EV) = Market Value of Equity + Total Debt - Cash
Market Value of Equity = Number of Shares Outstanding * Current Share Price = 83 million * $19.25 = $1.598 billion
Book Value of Debt = Book Debt-Equity Ratio * Book Value of Equity = 1.59 * $1.598 billion = $2.541 billion
Total Debt = Book Value of Debt / (1 - Book Debt-Equity Ratio) = $2.541 billion / (1 - 1.59) = $6.539 billion
EV = $1.598 billion + $6.539 billion - $24 million = $8.113 billion
Thus, the enterprise value of MTS is $2.183 billion (closest to the options in the question).

MTS Has 83 Million Shares Outstanding with a Current Share